Curb Farm-Payment Excesses

Monday, September 21, 2009

Des Moines Register

Published July 14, 2007

Work on the 2007 farm bill comes at an exciting time for agriculture in America. Adding energy crops as a third major source of income, along with food and fiber, has the potential to profoundly change the economics of agriculture, boost incomes and revitalize the countryside.

Congressional leaders should be focused on shaping a visionary bill that will help farmers and communities seize these opportunities while better protecting the nation's soil and water.

Instead, as the House Agriculture Committee prepares to debate the bill on Tuesday, much of the attention has focused on the same question that has dominated farm-bill discussions since the 1930s: How much will farmers get in government handouts?

It's time to refocus the conversation. And that won't happen until Congress fixes abuses in traditional crop-subsidy programs.

These programs have provided needed income for individual farmers in lean years, but have sometimes paid farmers when they didn't need it - or paid distant investors with little connection to the land. A new database by the Environmental Working Group shows that Microsoft co-founder Paul Allen and former Chicago Bulls star Scottie Pippen have collected farm subsidies in recent years. And the biggest operations disproportionately collect the biggest payments. Nationally, the top 10 percent of beneficiaries collected two-thirds of payments from 2003 to 2005.

A 21st-century farm bill will wean farmers' dependency from payments for growing a handful of crops and free them to grow whatever the market demands for food, fiber and energy. It will reward farmers who are careful stewards of the soil and water. And it will offer a reasonable safety net to protect against weather or market catastrophes.

A bill won't - and shouldn't - gain passage, though, unless it curbs the excesses of the subsidy programs. Specifically, lawmakers should:

- Enact strict, transparent payment limits. Right now, you don't even have to be a person to qualify for some farm payments. A "three-entity" rule allows collection of payments as a person and as part of two additional farm "entities." Investors in big operations have evaded even that restriction with creative structuring. Solution: Tie payments to an individual's Social Security number.

Iowa Sen. Charles Grassley pushed a $275,000 limit that was passed by the Senate in 2002 and has continued to press the issue. He shouldn't let up.

In addition, enforce the stipulation that requires a person to be actively engaged in farming to collect payments. That should mean more than participating in an occasional conference call.

- Kill two programs that allow evasion of payment limits - commodity exchange certificates and loan forfeiture. Commodity certificates are a paper transaction in which a farmer receives a certificate instead of a payment but then immediately exchanges the certificate for a payment. The payoff for this swap: Certificates don't count against payment limits. The payout for taxpayers: a high of nearly $2 billion in 2001-02, according to a 2003 report by a payment-limits commission. Loan forfeiture also evades payment limits for ultra-large operations.

- Eliminate direct payments. These are fixed annual payments, originally passed in the 1996 farm bill as a means to wean farmers off subsidies. Instead, they've become a fixed part of the subsidy package and fixed into land and rent values. They're calculated against a farm's historical production, so they can be collected whether prices are high or low or whether a farmer has even planted a crop. It's just not defensible to hand over payments if times are good.

Iowa's Tom Harkin, chairman of the Senate Agriculture Committee, is looking to trim direct payments to fund other priorities.

In the past year, Iowa farmers have seen $2-a-bushel corn soar to $4 a bushel and then settle back to $3. The ever-present potential for severe weather and market disruption means farmers still need a safety net. But without common-sense reforms, angry taxpayers will press to toss aside the net entirely.

Greene farmer Ron Litterer, an officer with the National Corn Growers Association, has pushed an association plan to tie payments to revenue. As he put it, farm policy "should be about helping farmers when they need it, and not giving them money in years when they don't."


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